2020 (12) TMI 781 - HC - Income Tax

Rectification u/s 254 - Tribunal decided the appeal of the Revenue on merits and ex-parte, as there was no presence on behalf of the Petitioner - Petitioner filed the Miscellaneous Application u/s 254(2) read with Rule 25 of the ITAT Rules, wherein explanations were provided for such non-appearance - affidavit of the Director of the Petitioner-company stating that the non-appearance was on account of the illness of the counsel - HELD THAT -The presumption of disinterest against the Petitioner is speculative. The other factor that prevailed upon the Tribunal was the lapse of time since the first date of hearing. Tribunal ignored the fact that Petitioner had approached the Tribunal in December 2018, and thus, the time gap of 2 years between the first date of hearing and the date of decision cannot be a compelling measure. In our view, these factors ought not to be viewed in isolation, without taking into consideration the sufficiency of reasons for non-appearance. Petitioner had given a sufficient and cogent explanation for non-appearance of its Representative, which, however, the Tribunal has failed to take into account. Besides, in para 6 of the Impugned Order, the Tribunal also went into the question of merits of the ex-parte decision, by delving into the correctness of order. This also was an erroneous yardstick for deciding the Miscellaneous Application. Tribunal has failed to appreciate that the Petitioner was seeking the recall of the order dated 24th July, 2018 and restoration of the appeal, and not the rectification of any mistake apparent on record. The merits of the case could not have been gone into at the stage of deciding an application under Rule 25 of the ITAT Rules. Rules 24 and 25 of the ITAT Rules enable the Tribunal to restore the appeal, if a party appears afterwards and satisfies the Tribunal that there was a sufficient cause for its non-appearance when the appeal was taken-up for hearing. The proviso to Rule 25 deals with the situation where the Tribunal has passed an ex-parte order, due to non-appearance of the Respondent, even though the order was passed on merits. Thus, we are of the opinion that the reasoning given in para 6 of the Impugned Order is beyond the scope and ambit of Rules 25 of the ITAT Rules. Assessee was prevented by sufficient cause from appearing before the ITAT when the appeal was taken up for hearing. Further, the Tribunal has taken into consideration such reasons which were not germane for deciding the Miscellaneous Application. The sufficiency of the cause, which was the only factor to be examined, has been ignored by the Tribunal. If sufficient cause is shown, the Tribunal is obligated to consider the same and make an order setting aside the ex-parte order, irrespective of the fact that the final order decided the appeal on merits. We are also persuaded to allow the petition, in view of the undertaking given by the Petitioner that it would apply under the Vivad Se Vishwas Scheme in the event the appeal is restored to its original number. The Petitioner s undertaking is taken on record and it shall be held bound by the same.

Summary

Issues:
1. Dismissal of Miscellaneous Application seeking recall of ex-parte final order.
2. Consideration of sufficient cause for non-appearance by Petitioner.
3. Interpretation of Rule 25 of the ITAT Rules.
4. Justification for restoring the appeal to its original number.

Issue 1: Dismissal of Miscellaneous Application:
The judgment pertains to a petition challenging the order of the Income Tax Appellate Tribunal (ITAT) dismissing the Petitioner's Miscellaneous Application seeking to recall an ex-parte final order. The Petitioner had filed the application under Section 254(2) of the Income Tax Act, accompanied by explanations for non-appearance due to illness of the counsel. The Tribunal rejected the application, citing lack of factual errors in the final order and the time lapse since the first hearing.

Issue 2: Consideration of Sufficient Cause:
The Court analyzed the reasons provided by the Petitioner for non-appearance and found them sufficient. The Tribunal's dismissal without examining the merits of the submissions was deemed inappropriate. The Court noted that the Petitioner had promptly filed the Miscellaneous Application and an appeal before the High Court, indicating diligence in pursuing the matter. The Tribunal's focus on the time gap and past adjournments was considered inadequate in the absence of a thorough review of the reasons for non-appearance.

Issue 3: Interpretation of Rule 25 of ITAT Rules:
The Court emphasized that Rule 25 of the ITAT Rules allows the Tribunal to set aside an ex-parte order if a party demonstrates sufficient cause for non-appearance. The Tribunal's consideration of the merits of the ex-parte decision was deemed beyond the scope of the rule. The Court clarified that the Tribunal's role was to assess the sufficiency of the cause for non-appearance, rather than delving into the correctness of the final order.

Issue 4: Justification for Restoring Appeal:
Considering the Petitioner's undertaking to apply under the 'Vivad Se Vishwas' Scheme upon restoration of the appeal, the Court allowed the petition. The orders dismissing the Miscellaneous Application and the ex-parte final order were set aside, restoring the appeal to its original number before the ITAT. The Court held that the Petitioner had shown sufficient cause for non-appearance, warranting the restoration of the appeal.

In conclusion, the judgment highlights the importance of considering sufficient cause for non-appearance in applications seeking to recall ex-parte orders, interpreting relevant rules accurately, and justifying the restoration of appeals based on valid reasons presented by the parties involved.